Wait – what is an MSA?  

There’s no shame here, it’s an important question! Lots of terms get thrown around with little to no explanation, so while it’s good to know you need an MSA it’s even better to understand what that means for you and your business. In collaboration with Caravel, Corporate, Commercial and IT lawyer Mark Wainman offers some thoughts on the basics of Master Service Agreements. 

A Master Service Agreement (MSA) is essentially a contract that lays the foundation for your prospective business relationships in the services realm. Think of it as the rulebook for the ongoing relationship between you and your service providers or the clients who have the good fortune to be your service recipients. It’s a comprehensive contract that lays out the terms and conditions under which you’ll work together.  

An MSA covers the nitty-gritty details: payment terms, intellectual property rights, confidentiality obligations, and liability limitations. It’s the backbone of your business dealings, providing a stable framework so you can focus on the exciting stuff—like growing your business and innovating in your field.  

How is it relevant to your business? 

Now, you might be wondering, “How does this MSA thing affect my business?” Well, if you’re in the business of buying or selling services, an MSA is your best friend.  

It streamlines negotiations. Instead of hashing out the terms every time you start a new project or service, the MSA sets the stage for all future transactions. This means you can jump straight into the specifics of the work without reinventing the wheel. 

For businesses that engage with multiple vendors or clients, an MSA is a time-saver and a clarity provider. It reduces the administrative burden and helps prevent disputes by making expectations clear from the outset. Plus, it can help build stronger, more trusting relationships with your partners, as everyone knows they’re on the same page. 

However, a single MSA template may not be your go-to solution for all situations. A business may have items it prefers to emphasize when selling vs. buying and a user may not necessarily want to use a sell-side MSA to cover their buying needs. You may encounter various iterations of MSAs across different business circumstances, whether you’re the sender or a recipient of someone else’s form of MSA. Plenty of larger businesses will turn out to have a whole toolbox full of MSAs, each with a niche use.  

How can it help you? 

An MSA isn’t just a piece of paper filled with legal jargon—it’s a tool that can help your business thrive. Here’s how: 

• Risk Management: By setting out terms like indemnification and warranties, an MSA helps you manage the risks associated with your business dealings. 
• Efficiency: With an MSA, you can fast-track the initiation of new projects or services. This efficiency can give you a competitive edge and help you respond quickly to market opportunities. 
• Cost Savings: Negotiating a contract for each new project can be costly. An MSA spreads those costs for both your own team’s time and any legal help over multiple transactions, saving you money in the long run. 
• Predictability: Knowing the terms of engagement upfront makes financial and operational planning easier. You’ll have a better handle on your cash flow and resource allocation. 

When to Consider an MSA 

An MSA is particularly beneficial when anticipating a long-term business relationship with multiple transactions or projects. It is ideal for situations where companies expect to engage in a series of ongoing negotiations or collaborations. Industries that commonly use MSAs include technology, construction, consulting, and any field where services are provided on a project basis. 

However, an MSA isn’t an all-encompassing solution. MSAs may suit a broad area of services but they start to make less sense if used for purposes not considered from the start. You should still expect to have project or situation-specific transaction documents that spell out the business deal and reference the MSA as a reminder of all the applicable legal and operational terms. 

Bear in mind that bargaining power is a factor to consider as well, where even a well-tuned and fair MSA offered to accelerate business between a small offeror and a larger recipient might simply be turned down. The bigger party may have already developed their own MSA approach and proven its success across many customers, so they may not need to pay much attention to anyone else’s preferred terms if the market isn’t pushing them that way. 

Do you always need an MSA? 

No – there are certainly exceptions! If you are only contemplating short-term, one-off assignments or trialing a relationship as you evaluate needs, an MSA may not be the most productive agreement for you.  

 To illustrate, you may want an MSA if you’re hiring a tradesperson’s team as part of a long-term maintenance plan for several of your buildings, it may not be worth the time and energy if you’re simply hiring them to fix something at your office for an afternoon.  Shorter and lower-value deals may have the recipient of your carefully crafted MSA say “no thanks”. A simple quote and a few basic terms may suit both parties just fine.   

What do you need to ensure you have a reliable MSA? 

Creating a bulletproof MSA is like building a fortress for your business dealings—it needs to be strong and comprehensive. Here’s a sampling of what’s often of benefit to address: 

• Scope of Services: Clearly define what services will be provided. Ambiguity is the enemy of a good MSA. 
• Payment Terms: Outline how and when payments will be made. This should include invoicing, late payments, and any interest on overdue amounts.  Some industries also count on reasonable hold-back terms when you can’t quite tell how to measure success until the very end. 
• Intellectual Property: Specify who owns what. If you’re creating something together, decide how intellectual property rights will be shared. 
• Confidentiality: Protect your secrets. Ensure there’s a clause that keeps your confidential information under wraps. 
• Dispute Resolution: Plan for the worst. Include a process for resolving disagreements if either day-to-day representatives or your respective leadership can’t find a path forward. Give them a process with a chance to fix things informally before incurring the expense of formal routes, with an advance agreement of when disputes ought to go to mediation, arbitration or the courts. 
• Termination: Know how to end things. Define the circumstances under which the MSA or any given transaction document supported by it can be terminated by either party. As MSAs might support a whole series of projects, take care that pruning via termination is precise. Maybe several ongoing projects are doing just fine but there’s one project that has to go, plan ahead on how you can keep the good and move on together from the bad. 

What long-term upkeep do MSAs require? 

Like any long-term relationship, an MSA requires a bit of TLC to keep it in good shape. Here’s what you may wish to consider: 

• Regular Reviews: Business changes, and so should your MSA. Review it periodically to ensure it still meets your needs. 
• Updates for Legal Compliance: Laws evolve, especially in the fast-paced business world. Update your MSA to comply with new regulations. 
• Performance Monitoring: Keep an eye on how the terms of the MSA are being executed. This can help you identify areas for improvement. 

Do I need a lawyer to draft my MSA? 

Yes! While you may be able to gather the basics online, recycling someone else’s precedent which was customized for their needs isn’t likely a best fit for your priorities and requirements. Legal professionals will provide you with:  

• Expertise: Lawyers have the legal expertise to ensure your interests are protected. 
• Customization: They tailor MSAs to your business’s unique needs, avoiding one-size-fits-all pitfalls. 
• Risk Mitigation: Lawyers identify potential risks, reducing future headaches that may drag on your business. 
• Negotiation Leverage: A well-drafted MSA can give you the upper hand in negotiations. 
• Compliance: Ensure your MSA adheres to current laws and regulations. 
• Clarity: Lawyers help prevent ambiguous language that could lead to disputes. 
• Peace of Mind: Having a professional handle your MSA lets you focus on your business. 

Keep in mind that even if you aren’t actively considering developing an MSA of your own, you never know when a client or vendor will drop their own form of MSA on you!  Expect that template agreements of any kind presented to you are sure to be tuned to that party’s needs. So, even though you can feel good about potential long-term opportunities, remember to prioritize your own business’s interests and call for the right legal help when needed. 

In summary, an MSA is commonly a foundational element for any business that regularly engages with service providers or clients. It’s not just a formality; it’s a strategic tool that can save you time, money, and headaches. With a solid MSA in place, you can build lasting, productive relationships that help propel your business forward.  

Caravel has over 100 lawyers, with many MSA experts. Get in touch with us today to find a legal professional who can support you with all of your MSA needs.